The Ramsey Show - App - You’re Hell-Bent on Getting Rich Quick (Hour 1)

Episode Date: March 13, 2023

Dave Ramsey & George Kamel answer your questions and discuss: The best way to use an inheritance,  "When do you have to pay capital gains tax?" from the blog: What Is Capital Gains Tax? Why you should hardly ever put money in CDs. from the blog: What Is a Certificate of Deposit (CD)? Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Take our FREE 3 minute assessment: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the pods of Moving and Storage Studios, it's The Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. George Campbell Ramsey Personality is my co-host today as we answer your questions about your life and your money. It is a free call and some say the advice is worth exactly what you pay for it. The phone number 888-825-5225.

Stephen starts this hour in New York. Hi, Stephen. Welcome to the Ramsey Show. Hey, Dave. Thanks for having me on. I appreciate it. Our pleasure. How can we help?

So pretty much I am coming into a large inheritance, and I want to know more sense of guidance and strategy on this particular subject because I want to maximize this amount of money. You know, I'm very familiar with the philosophy you guys have, and I agree with a lot of it. It just seems like I want to be able to turn this into generational wealth and sustainability for my family. So I was just trying to get your opinion on that.

Wow. How much are you getting as an inheritance? It seems to be upward of $700,000, around there. Wow. Who passed? It's going to be my wife's grandfather. I'm sorry. Thank you. So how old are you?

I'm 32. You're 30? 32, yeah. 32, 32, okay. What's your net worth? Roughly, I would say around $300,000. Okay. So safe to say you haven't managed a large sum of money in your lifetime.

No, nothing of this magnitude. I've pretty much achieved everything on my own but something like this i want to be able to scale and you know take my life to a different uh a different level i suppose yeah great great question and it's um uh good that you're feeling the weight of the responsibility of this rather than uh woo, I hit the lotto, uh, because right after people say stuff like that's when they do stupid butt stuff. And so, um, you know, if you'll feel the weight of this and the, here's what I want you to feel.

I want you to feel the weight enough to manage it and do and be very careful with it. But I don't want you to feel the weight to feel the pressure to dive into something, you know, nothing about. That's the other thing. I agree with that. So if you feel like, oh, I've got to do something with this, I'm going to put it all in crypto, you know, then we would call you stupid and we'd look up stupid in the dictionary,

there'd be your face, right? And so we don't want to do that, right? So that's not the point. So the idea being here that what wealthy people do is over time they build relationships with people they can trust in different areas. I call them my board of directors, although they're not a board of directors. Okay. So you want an independent insurance agent that has the heart. All of these need to have the heart of a teacher.

Okay. Okay. Okay. You need a tax accountant, maybe a tax attorney. You need a real estate agent. Okay. You need an investment broker. SmartVestor Pro would be a good one. Real estate agent and ELP would be a good one real estate agent and elp would be a good one

okay you don't need them because you're necessarily going to invest today or you're going to buy real estate today or you're going to go buy insurance today you're putting people in your corner that have expertise in money areas that you don't have to advise you and teach you so they're they're the guys you call so like when i die because it's predetermined that i'm going to die first sharon is going to call the broker that is our smart vestor pro okay and we have a long we have a 20-year personal relationship with him and his wife sharon trusts him and that's part of our board of directors okay Okay. Jeff Zander at Zander Insurance handles all of my personal insurance and my business insurance. So any insurance questions, Sharon will be on the phone to Jeff.

And I'm on the phone to him if I've got a question. You follow me? So we'll put a board of directors in your corner. That's helpful, number one. Number two is don't invest in anything you can't tell me how it works. And don't invest in something because you're excited. If your pulse rate's up, you're getting conned. It should be boring.

I'm trying to, you know, I do invest in myself, nothing to this magnitude, and I'm trying to break into real estate investing and things like that. It's more a sense of I have a lot of options, and I'm trying to figure out which is the path that's going to be. Slow is the path. Slow. Well, you see, Dave, the inheritance is already in equities.

Now, I was trying to, I could easily leave it there, put my feet up, and say, hey, that's it. I'm just going to let it grow. I could roll it over to mutual funds and not think about it again and you'd be just fine exactly but i want to be able to take this like dave this is the difference like if somebody gave you this money you'd be able to flip that into you know double it triple it because you're very well versed no i i would double it or triple it over seven to ten years i wouldn't double or triple it over 20 minutes no not 20 minutes not 20 minutes not even not even one year not even

one year but no 10 years time just something that's no it's not about being impatient it's just about being uh optimal i don't i i could easily leave, but I would like to maybe use it for possibly real estate. I'd like to buy my own real estate first on my own. Do you have any debt? I have my home and a few student loans. What do you owe on your student loans? $25K.

What do you owe on your home? I owe about $38 but it's worth about 700 now so i got the equity in that phenomenal okay yeah that part where you said you do almost everything we teach um is now kind of come out because now i'm going to tell you to take your 700 i'm gonna pay off your house and i'll pay off your student loans and I'm going to pay off your house and I'll pay off your student loans. And I'm going to put the rest of it into some mutual funds for a year, maybe two. And then I'm going to think about real estate as that has grown only then. But Stephen, it's all over you. I can smell it. You're not going to do that.

You're not going to do that. You're hell bent on getting, on turning this money into something and proving something. Please don't try to prove something with this money. Honor her grandfather's memory. He would not have done the things you're getting ready to do. Don't do them. And, Stephen, I don't know if you've talked to your wife about any of this. I'm worried that she's going, well, Stephen said he's got a plan.

You need to be on the same page with what you're going to do and be in full alignment, and you both need to understand this. And you asked about generational wealth. The best way to create generational wealth is to start with you, and you stop being broke, and you have no debt. Then we can start to build something for the future. If you just put a million dollars away at $3,300 that you've got, $700 there, and you put it in mutual funds and in real estate, and it averages 10%. Every seven years, it will double. When you're 37, you'll have 2 million. When you're 44, you'll have 4 million. When you're 51, you'll have 8 million. When you're 59, calm down, you're going to have 16 million. Okay? If you don't screw this up and go follow some nothing-down real estate bullcrap on Tic Tac,

this is The Ramsey Show. Well, I love tax season, said nobody ever. Questions about taxes, though, they're coming in, and we'll help you with those. Here's a question from one of our listeners. Dave, we normally have someone do our taxes, but our accountant retired. I think we have a simple return. Should we try to file ourselves with Ramsey Smart Tax? Well, you can use the Ramsey Smart Tax software.

It's very easy to use. The more complicated your return, the more likely you would want to use a professional. I personally use a professional, but mine's the size of a freaking phone book when I get it done. So, you know, that's different, obviously. We recommend working with a tax pro if you've had a major life change, like you're retired, got an inheritance, adopted a child. If you own a business and file long form on that, probably pro uh you're not confident you're confident though uh or you want to save time and stress these are reasons that you'd want to do this but if you get if you get into it and it's just like god i hate this okay there you go that tells you right there right so i hate it

anyway i hate just signing the thing much less preparing preparing it. So that's the whole thing. I see it like buying back your time and mental sanity when you work with a pro. Now, people have simple situations. They've got a W-2. If you've got a 1040 Easy, you know, do a Ramsey SmartTax. You can do that as fast as you can do a 1040 Easy. Don't pay somebody $300 to do that. I mean, it's just filling out.

When you can pay $20 on your own. But I haven't had one of those in my life, so I've always been self-employed. Nothing about Dave's life is easy to tell you that much. Well, I don't have an easy button anyway. But, yeah, no, I mean, I've always been self-employed or had some kind of weird income or something going on where I didn't trust my own level of tax knowledge to do it. So either way, if you want a pro or you want to use the ramsey smart tax software just go to ramsey solutions.com slash tax our question today comes from our brand

new sponsor neighborly we are so thrilled these guys are on board with us it's brought to you by them they're your hub for home services stuff like mr router mr electric you'll see those at neighborly so if you need to make repairs or schedule routine maintenance or find local help for home improvement projects, Neighborly is your source for reliable home service providers in your area. Go to Neighborly.com and start your search. Today's question comes from Claudia in Mississippi. She's asking, under what scenario do you have to pay capital gains tax on real estate? Here's my situation. My grandfather quick claim deeded his house to me.

The house is completely paid off. He paid $24,000 for it in 2013, and it's now evaluated at $190,000. I'm wanting to sell in hopes to buy a new property. I've lived with them since 2020, and I took ownership in 2021. Under this scenario, would I be liable for capital gains? No, because it's been in your name for more than two years. It's been your personal residence for more than two years. A single person can make a profit of up to a capital gain of up to $250,000.

So that'd be $274,000 in your case because his basis was $24,000. A profit of $250,000 with zero income tax on your personal residence. However, this was stupid. You almost stepped in it. You accidentally are okay, not because you had a plan. If the numbers were different, the house value was much higher, this could have been a different scenario. So never deed property to someone prior to your death like grandpa did. Here's why. Let's pretend that she didn't accidentally fall under this personal residence exemption for $250,000, which saved her bacon. Okay.

So let's say that she didn't live in the property. That would do away with the personal residence bit. Get it? Okay. So now it's grandpa lives there, but grandpa wants to make sure granddaughter gets it. And he doesn't want to deal with the wills and stuff because he knows how those lawyers are. And so he, you know know this is a kind of

crap people do okay so then he deeds the property to her with a quit claim deed which is a usually a one-page thing and costs six to ten dollars to register at the courthouse it's very easy to do this stupid move now here's what happens when you give someone property or a capital asset, stock, if I give George money, if I give him a share of Home Depot stock, if I give him a piece of real estate, his basis when he gets ready to resell it is based on what I paid for it. And so in this case, grandpa paid $24,000 for it. So her basis is twenty four thousand dollars if she had not lived in the house for two years it would be called investment property one hundred percent of everything over twenty four thousand dollars

would be taxable major mistake hundred and fifty thousand dollars were the taxable income created here instead had he deeded it to her in his will at his death it went to her you get what's called a stepped up basis her basis becomes the value at the time of his death apparently he's still alive but at the time of his death let's say he passed in this situation her basis would not be 24 000 it'd be 190 000 she turns around sells it for 190 000 zero capital gains so the fact that duber deeds this thing before his death grandpa dad gum you sweet but dumb okay could have cost her taxes on 150 000 or more here it didn't because she happened to live in the property for two years. So don't give people stuff. Let market value at the time of their death be their new basis.

It's a lot higher than what you paid for it, and control the ownership vehicle not by an early deed but with either a trust or a will or both. When does it make sense to use a quick claim deed? What scenarios? Divorces. Even then, though, you can get into trouble because most divorce attorneys make a huge legal error. Ooh, I'm calling you boys and girls out because here's the thing. Husband and wife get divorced.

There's a $260,000 mortgage. Husband doesn't get to keep the house. Wife's going to get the house because the kids are living in the house. And divorce attorneys say, well, just part of the settlement is you're going to quit claim your half of ownership to her. And so he fills out a one-page quit claim as part of the divorce decree. Boom. There we go. But guess what? Husband still has a $260,000 mortgage. That's messy.

In his name. On a house he's not a part of. Five years later, he gets remarried and wants to have a life and buy a house. Can't do it. Still got a $260,000 mortgage in his ex-wife's name. Doesn't own the property, but still got the mortgage. Dumb. You're getting a divorce and doing a quit claim deed.

Force a refinance or force the sale of the house. One of the two. Either the wife, the ex, soon to be ex, or whoever's going to of the house one of the two either the wife the x soon to be x or whoever's going to get the house refinances and gets the other person's name off the mortgage or we sell the house and get the name off the mortgage because you're going to get stuck and divorce attorneys do this all the time because it's easy it's easy but it's wrong okay same thing here this is for a different reason though this is a when would you use a quit claim deed uh i just moved property from one llc to another the other day i used a quit

claim to do that to switch the ownership yeah it's just i already and i own both llcs so it's not it's a non-issue right um when else would you use a quit claim deed? See, a quit claim deed means you, here's real estate theory for you. You do not, a warranty deed is what usually transfers in most states a house, a piece of property. And that means if I'm transferring property to you, George, I am giving you a warranty on the title, that I have the title. I am the owner of the title, and I am willing to warranty that and transfer that to you. Then if I didn't own the property and I did that, then you would have recourse back on me. Okay. But I could give you a quit claim deed to someone else's property,

because all it says is I quit claiming whatever ownership I have. And if I have no ownership, I quit claiming it. Wow. And I gave you nothing when i quit claiming whatever ownership i have and if i have no ownership i quit claiming it wow and i gave it gave you nothing when i quit claiming it so i could give i could give you a quit claim deemed to james's house i'm in and it would tip wouldn't do you any good i'm gonna quit claiming all of my ownership which is nothing wow so if you don't have pure ownership and you quit claim deed something it's of no value and uh you can really get into all kinds of crap there. So sometimes you'll use it to do some title cleanup if there's something more nuanced than all of that. I've only heard it mostly in the context of divorces.

Divorce and estates. Grandpa doing a dumb thing like this or estate planning attorneys doing a dumb thing without forcing a refinance. I mean divorce attorneys not forcing a refinance. And then you get stung and you're stuck with a mortgage on a house you don't own anymore with a woman you aren't married to anymore. There's something about this that's miserable to me. This is The Ramsey Show. George Campbell Ramsey personality is my co-host today in the lobby of Ramsey Solutions,

which, by the way, if you're coming through Nashville, you'll stop by. It's free cookies, free coffee, and lots of nice folk hanging around watching George and I do the show through the glass. It's kind of like watching ugly paint dry. I can't think about it too long. It's definitely weird, but we love it. We're doing it it every day anyway so you ought to come by and see us and uh it's also where we have the debt-free stage which is where jeff and becky are standing hey guys how are you great how are you great welcome welcome where do y'all live parker colorado all right well that's uh den right? Yeah. Yeah. Welcome. Welcome to Nashville. And how much debt have you guys paid off? We paid off $162,000.

How long did this take? About 33 months. Good for you. And your range of income during that time? The range of income was $135,000 to $175,000. Cool. What do you guys do for a living? I'm in software sales. I'm a teacher's assistant in a special needs classroom. Very good. Excellent, you guys. What kind of debt was your $162,000?

Well, you're looking at weird people, Dave. We paid off our house. Yay! Officially weird. Love it. What's this house worth? Just looked, and it's worth about $660,000. Awesome. And how much in your retirement accounts? Just looked, and it's worth about $660,000. Awesome. And how much in your retirement accounts? We are right around $750,000. So we're looking at Baby Steps Millionaires.

Way to go, guys. Very proud of you. Paid off your house and hit Baby Steps 7 and hit Baby Steps Millionaire status on the fell swoop. So what started you? I mean, you come along, you're doing good. And 33 months ago, you go, we're going to do even better even better we're gonna pay off the house tell us the story how'd you get started on this ramsey stuff well it started a little bit further back than that maybe five years ago i was talking with my brother and our idea of what i needed to retire for hitting a number was vastly different than his

and he had about a goal of double of mine. So I started thinking about what we can do. And shortly after that, I got your book, Total Money Makeover, and read it and started to attempt to try and do a budget. And honestly, we kind of failed miserably for a little while. So I took it to Becky and we kind of gave up for a while. But then we had our, like, finally, we had a moment where we were in kind of a up for a while, but then we had our, um, like finally we had a moment where we were in kind of a deep financial trouble. We had, uh, taken out a HELOC to, um, redo our kitchen, but then ended up not using it, but we use basically we're completely cashless. We had no money and all three of our cars needed tires at the same time.

So we needed to get out of our financial hole and had our never moment at that time never again yep so uh becky he comes down and goes uh we can't even get tires and you said what it was you know we were tired of never having money we were fighting about it all the time and so it was just kind of time to do something else and change that and um i guess the rest as they say is history so you drug the total money makeover book back off the shelf or what how did this work yeah we both read it again together and um started working on it and did the budget again and started figuring things out together and it was life-changing marriage changing it was awesome yeah first two or three months are rocky

and then it starts smoothing out yeah smoothing out smoothing out by the time you get here you go why didn't we do this 20 years ago yes yeah you need to give each other a little grace because it is challenging and I found a lot of encouragement from listening to the podcast every day. So you guys gave us a lot of hope. Wow. And this started as some brotherly competition. You went, oh, he's not going to beat me. I got to step it up. Yeah. He put a vision out there that was very daunting, but encouraging. That's amazing. So paying off the house is a big, it's controversial in today's world because people are going, why wouldn't you tap into the equity? And you guys, you did the HELOC, you didn't use it. But what would you say to those people who go, why are you paying off your house?

That doesn't make any sense. We just always wanted to be debt-free. My dad brought me up to not believe in much debt, but we'd had a mortgage for about 18 years and we'd made almost no progress on it. We'd moved twice. We'd sold our house for what we'd bought it for. And then we had another house that we'd been paying on for eight years and we really had not seen it go down very much. So we just attacked it and said, this is it. We're going to do it. Yep. Wow. Way to go guys. So proud of you guys. Very, very cool. Excellent work. How's it feel to not have a payment in the world and be millionaires? Amazing.

It's just amazing. It's kind of hard to put it into words, I think. Yeah. What do you tell people when they say, what's the key to getting your home paid off? I would say there's two things. You have to do whatever it takes so what was the wildest thing you did under the whatever it takes heading i'm in software sales making a pretty good salary and i drove uber for a year she went back into the workforce after not working for 15 years

to oh wow 15 years to raise the kids and we even had our oldest son get a job so everybody was trying to do something to help the everyone's got skin in the game yeah way to go gosh way to go and then the other thing i was thinking about that we talked about too was the second part is um you have to believe in yourself but you have to partner with the lord and so believing yourself gives you hope but then praying and pondering with with with the Lord really brings his power into it and there was months that we should have never been able to make a payment that we were typically making and something would happen and then we would have the money and it was just always there yeah you hit it hard I mean 33 months 162,000 you were popping that thing.

Yeah. You guys weren't playing. Yeah, there were some frustrating moments. Every time I wanted to do something on the house or in the yard or whatever, Jeff would say, not until the house is paid off. And I was like, okay, I know. That is what we said. So did the kitchen ever get remodeled? That's the question.

Yeah. And you just cash flowed that. Yep. So what's the next big thing you do? Weed that yep yep so what's the uh what's the next big thing you do we're paid off house millionaires what do we do we're gonna go to belize there you go there you go have you ever been before no it's incredible we're looking forward to it you'll love it i don't know how i don't know how god made water that blue yeah it's unbelievable you're gonna love it that's so cool do you dive are you divers no oh go get certified for you go we'd love to it's one of the best dive spots in the world

way to go you guys very cool excellent excellent excellent all right very fun you guys we're proud of y'all well done well done you're why we do this very cool we got the live and give bundle for you it includes the total money makeover book for you to give away and mess with somebody else's life like your brother did with yours and the baby steps millionaires book which basically highlights the what you've been doing and uh you'll read through it and go uh-huh then you can give that away and encourage somebody and financial peace university a membership to that again use it or give it away it's all for you to enjoy thank you for making a trip to n. Again, use it or give it away. It's all for you to enjoy.

Thank you for making a trip to Nashville. Yeah, thank you for everything you all do to bring encouragement to people's lives. And we wanted to thank our kids for putting up with us for these last three years, for saying no to things, and for allowing us to get this done, and all of our friends and family and people at church that have encouraged us along the way. Yeah, you've had some good cheerleaders. And you know what? The kids got a gift out of this because they got to see mom and dad learn something new,

change something late in the game, become new people, transformed, and that gives them hope they can do whatever they want to do. You gave them a lot of power by them watching you. Well done. Very well done. Love it. Jeff and Becky, Denver, Coloradover colorado 162 000 paid off in 33 months making 135 to 175 house and everything baby steps millionaires count it

down let's hear a debt-free scream three two one we're dad free more is caught than taught i've always heard rachel cruz say that and it's so true most people make bad decisions because they saw their parents make bad decisions but this family right here they're going to start doing things differently those kids saw their parents hustle and pay off for three years i mean mom went back to work. Dad's driving Uber. The old man, old lady did what it took. That's what the kids remember, right? They did what it took to win. I love it. They're not that old, but still, I mean, that's the way the kids think about it, right? Sure. But a lot of people do think, well, Dave, I should have done this in my 20s. It's too late for me now. I'm 40. I'm 50. I'm 60. It's not too late. You really can't fix what's behind you. All you can fix what's in front of you. So today's your day.

And 33 months later, you could be debt free. Ready, set, go. Ready, set. Yeah, it's your turn. Ready, set. You, I'm talking to you. Go! George Campbell Ramsey personality is my co-host today hey if you're a new listener and we know there's a whole bunch of you that are new viewers and listeners on YouTube TBN podcasts all our

numbers are up this year thank you very much we appreciate that but that also means some of you are trying to catch up on this uh Ram speak, the code. The lingo. What's all this baby step stuff, George? What's all this debt snowball stuff, Dave? Hey, if you want to kind of get grafted in and learn this stuff, we'll help you. Just go to RamseySolutions.com. Click on Get Started. It's completely free.

We'll help you figure out where you are in your financial journey and tell you what we think your next steps would be, and you'll start to learn the lingo. You'll start to figure out why it is we tell people to do all this stuff. So that's the plan. RamseySolutions.com. Click Get Started. It's completely free. Amanda's in Charlotte, North Carolina. Hey, Amanda, welcome to The Ramsey Show. What's up? Hi, Dave. I lead a class of 20 homeschoolers who are taking your high school personal finance class yay thank you yes 20 of them and recently we learned that cds are not wise investments so today in class i proposed to them them a 5% CD for six months. And as a class, we wanted to know what your recommendation would be to make that investment. I'm sorry.

I thought we learned that CDs are not wise investments. They aren't, right. And so you proposed to them a CD. Well, that's what there's a conversation. And you want to know if I think they're wise investments. That was a conversation we had on the table, should at 5%, which is a high yield, for six months. It's 5% annual yield, not six-month yield.

But, yeah, it's not 10% a year. Right. And the inflation rate's running 9.6 right now, right? Mm-hmm. So you'd be going backward, right, in purchasing power. That's why we call them certificates of depreciation. Good point. them certificates of depreciation good point so the cds cds might be okay to park some money for a short-term thing a short-term thing by definition is not an investment uh and so i wouldn't use it

for an emergency fund but let's say that i was saving money for a car or a house down payment or for a cruise or something i'm going to take in the fall okay and i wanted to park my money somewhere other than in a savings account i could put my ten thousand dollars in at five percent and let it sit till september and that'd be okay but here's the here's the trick am. It still didn't do anything. 5% of $10,000 is $500. Half of that in six months is $250. So you made $250.

Whoopty-doopty in the scale of your life. We're talking $50,000. We're doing, we were talking $50,000. Why would you put $50,000 aside for six months? That's what we were talking about in class. What are you going to do with it after six months? It was just an opportunity to make a few thousand dollars in six months when savings accounts were 4%. I wouldn't have $50,000 in a savings account, though.

Unless you had other diversified investments. I wouldn't have $50,000 in a savings account other than my emergency fund unless I was saving to purchase something. You see what I'm saying? There's no point in it. I want the money working harder than that if it's a long-term play.

If it's a short-term play, it's not really, it doesn't change your life. It's just negligible at that point. So there's short-term savings and long-term investing. If you have $50,000, $1,250 doesn't change your life much. Right. So if you have real estate investments in place and you have portfolios established and you had an extra $50,000. I would put it in those.

Put it in the mutual funds? I'd put it in the real estate or mutual funds. It's what I do every day. What if your real estate investments are paid off? I would buy more real estate. I'm sorry, say it again. All of my real estate investments are paid off. I would buy more real estate.

So are mine. So are mine. So are mine. Okay. Then buy some more. But I wouldn't put $50,000 at a poor investment just because I had some other investments that were good investments. Good. That's what we wanted to know. Okay.

I'm so confused by this call. And the other problem here is if you needed that money, let's say there was a great real estate opportunity, the cash for it and it's tied up in the cd i think i just i think i was on her homeschool test and i think i just flunked it you're not passing i think i didn't answer the multiple choice as the kids say you're not passing the vibe check that's what they say now when they disagree with you they don't like your attitude and your tone so you're not passing the vibe yeah if we don't like what you're saying, then we automatically don't like your tone. That's how that works? Yes.

I don't know. I don't know what I was doing. Well, here's the other problem. What was I doing? With CDs? No, what was I doing in that conversation? I have no idea. I felt like I was chasing my tone.

I had a good time. I was entertained. If that's any consolation. That's why we're here, George. But the thing with CDs is, you know, my high-yield savings account, which is completely liquid, I'm getting four and a quarter now. And so to say, hey, would you want to lock this up for the next six months or a year to make a little bit more and have some penalties on the interest if you take it out early? And what if the interest rates continue to go up?

Well, you're locked in with that CD at that rate. It's okay if you want to make 5% on some money that you're going to need six months from now. If you're going to lock it up at 5% and call that a long-term investment, that's dumb. To say investing in CDs is dumb. Long-term investments have to outpace two things before you make what's called a real rate of return. A real rate of return is adjusted after taxes and inflation. Okay, if inflation is running 9.6, you have to make north of that. And inflation, by the way, is averaged over the last 75 years, about 4.7.

Okay. So lately it's been high inflation. We all know that, uh, before that it was a little bit lower, but the average is around four or 5%. Okay. And if you figure you're going to pay taxes on it, another couple of points, another 2% or so you've got to make north of 6% on your money, 7% on your money to break even with taxes and inflation on a long-term investment. So you've got to be in something like mutual funds where you're 10 to 11% good real estate. That's going to cashflow and give you an internal rate of return, probably north of 15%, somewhere in there. But you've got to be in your long-term investments north of 5% or 6%, or you don't even break even with inflation and taxes. Now, short-term investments, you're not really investing.

You're saving. There's no such thing as short-term investment. There's savings, and there's investing. Investing, by definition, has some length to it. And so would I tell you to park money into a cd in any circumstances for 10 years at five percent and lose money after inflation and taxes no i would not that's you know so the only time i've heard you say put in a cd is when people get a big pile of money and they need patience and time and you go just someone passes away and your husband died and you got left $400,000 sit on it in a CD

for six months a year and cry and get your head cleared before you start making good decisions before you start making decisions in the middle of grief or something like that just give yourself time for the the brain webs to clear and that kind of stuff. But again, that's not a long-term strategy. That's a parking place for a short term. If I'm going to buy something with a $50,000 in the fall, it's a parking place. 5% is fine. But even then, you need to realize the difference in 5 and 1 is $1,250 and what, $50 bucks or $500 or 500 bucks 550 bucks okay uh is that on the 50 grand yeah yeah that's right so it doesn't change your life you know it's like i got in all kinds of trouble when with

the last biden bucks thing biden came out and gave everybody 1300 bucks or whatever it was and i said if 1300 bucks changes your life you don't have much of a life well you're just snotty and you're a snob and you're just a rich guy 1300 a lot of money you shouldn't say stuff like that the little people get mad at you listen you're gonna keep being little people if 1300 changes your dadgum life you need to have a better life than that where 1300 doesn't if fixes your life, you were really screwed before. That's the thing. It's okay. $1,250 is good.

Send it to me. I'll do something nice with it, but please don't think that fixes anything. It doesn't. It's not life-changing money. It's not life-changing money. When you run these things out nominally, meaning do the actual math and the actual dollars, it's a bit of a joke usually. This is The Ramsey Show.

Hey, George Campbell here. If you love the show and you want a deeper dive on your money journey, we've got a weekly newsletter that gives you helpful articles and tips on following the Ramsey way. Just go to ramseysolutions.com today to sign up for the newsletter. Again, that's ramseysolutions.com to sign up for our weekly newsletter.